CALIFORNIA WATER
SERVICE GROUP
LOGO NEWS RELEASE
CALIFORNIA WATER SERVICE GROUP
1720 North First Street
San Jose, CA 95112-4598 January 26, 2005
For Immediate Release
Contact: Richard Nye (408) 367-8216 (analysts)
Shannon Dean (310) 257-1435 (media)
COMPANY ANNOUNCES 4TH QUARTER 2004 RESULTS
AND TOTAL YEAR 2004 RESULTS
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BOARD DECLARES 60TH CONSECUTIVE ANNUAL DIVIDEND
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SAN JOSE, CA - California Water Service Group (NYSE : CWT) today announced
diluted earnings per share of $0.20 for the 4th quarter of 2004 compared to
$0.41 for the same period last year. Fourth quarter 2004 net income was $3.7
million, compared to $7.0 million in the fourth quarter of 2003. Primary factors
contributing to the decrease were lower gains from property sales, weather and
additional shares outstanding.
Revenue for the quarter decreased slightly to $69.4 million, a decrease
of $0.2 million or less than 1%. Usage by existing customers dropped
significantly due to weather, decreasing revenue by $4.3 million. Partially
offsetting the decrease in sales was $0.8 million in revenues from sales to new
customers and $3.3 million in revenues from authorized rate increases.
Operating expenses for the quarter were $61.9 million, a decrease of
$0.2 million or less than 1% over the same period last year. Lower water
production costs and lower income taxes were offset by increased expenses in
several other categories, including payroll, benefits, legal, Sarbanes-Oxley Act
compliance, and depreciation.
Other income was lower, as the Company had no gains from surplus
property sales in the fourth quarter, compared to pretax gains of $3.1 million
in the fourth quarter of 2003.
"Company-wide, we understand the importance of operating efficiently.
However, certain costs were incurred to ensure that we fulfill our obligations
to our employees, comply with all laws and regulations, and provide customers
with the quality and service they expect. That said, we will continue to pursue
rate relief that reflects the higher costs of providing high quality water
utility services to ensure that our stockholders earn a fair return on their
investment," said President and Chief Executive Officer Peter C. Nelson.
The Company received approval to increase rates on an annual basis by
$4.1 million for step rate increases effective in January 2005. Also, in the
past three months, the Company received approval to collect $9.2 million related
to balancing accounts. The collection periods vary by district and range from
one to three years. Pending applications to the California Public Utilities
Commission (CPUC) include 2004 general rate case filings totaling over $26
million for eight districts and corporate headquarters. The Company cannot
predict the final amount or the timing of the CPUC's decisions on pending
filings.
Another regulatory matter of note is the treatment of gains from sales
of surplus properties. In 1995, the California Legislature enacted the Water
Utility Infrastructure Improvement Act of 1995 (the Act) to encourage water
utilities to sell surplus properties no longer useful in providing water service
and to reinvest the proceeds of the sales in needed water utility facilities.
The Office of Ratepayer Advocates (ORA), a division of the CPUC responsible for
representing the interests of ratepayers, issued a report on January 11, 2005,
expressing its opinion that the Company had not proven that surplus properties
sold since 1996 were no longer used and useful, and challenging the Company's
treatment of the gains from those sales. ORA recommended that the Company be
fined $160,000 and that an unspecified portion of the $19.2 million in gains
from sales be allocated for the benefit of ratepayers. The Company believes it
has fully complied with the Act and that ORA's conclusions and recommendations
are without merit. Accordingly, the Company intends to vigorously oppose ORA's
report and no liability has been accrued in the financial statements for ORA's
recommendations. Because ORA's recommendations are not binding, the Company
cannot predict how the CPUC will rule on this matter.
2004 Results
For the year, net income increased $6.6 million to $26.0 million and
diluted earnings per share increased $0.25 to $1.46. Annual revenues, which
increased 14% to $315.6 million, were boosted by $29.8 million from rate relief
granted by the CPUC, $5.4 million from sales to new customers, and $3.2 million
from increased sales to existing customers.
Total operating expenses increased to $274.1 million, or 11%, for the
year. The Company incurred higher wholesale water rates and purchased more water
in 2004; as a result, water costs increased by $9 million. Other operating
increases were primarily in income taxes, payroll and benefit costs, legal,
Sarbanes-Oxley Act compliance and depreciation expense.
In 2004, there were minimal gains from surplus property sales, compared
to $4.6 million in pretax gains from surplus property sales in 2003.
According to Nelson, the Company continued to see the positive effects
of rate relief as the CPUC issued several decisions on the Company's
applications during the year.
"Last year was a mixed bag as far as weather is concerned; dry, warm
weather increased sales in the second quarter, while record-breaking storms
reduced sales in the fourth quarter. What has remained constant is our pursuit
of fair and timely rate relief in all of our operating districts," Nelson said.
Dividend Information
At their meeting yesterday, Directors increased the quarterly dividend
on common stock from $0.2825 to $0.2850, which marks the 38th consecutive year
the Company's dividend has been increased. It is payable on February 18, 2005,
to stockholders of record on February 7, 2005. The regular dividend on Series C
preferred stock was also declared.
Other Information
On Thursday, January 27, 2005, at 1 p.m. Pacific Standard Time (4 p.m.
Eastern Standard Time), the Company will conduct a teleconference call, at which
time management will provide comments about fourth quarter and year-end 2004
operating results and other pertinent matters. Any stockholder or interested
investor can listen to the teleconference or a replay. The dial-in number to
access the teleconference is 1-866-814-1917, call ID #620290. Additional
information about the call, including replay information, is available at the
Company's web site, at www.calwatergroup.com.
California Water Service Group is the parent company of California
Water Service Company, Washington Water Service Company, New Mexico Water
Service Company, Hawaii Water Service Company, Inc. and CWS Utility Services.
Together these companies provide regulated and non-regulated water service to
over 2 million people in 100 communities in California, Washington, New Mexico
and Hawaii. Group's common stock trades on the New York Stock Exchange under the
symbol "CWT."
This news release contains forward-looking statements within the
meaning established by the Private Securities Litigation Reform Act of 1995
("Act"). The forward-looking statements are intended to qualify under provisions
of the federal securities laws for "safe harbor" treatment established by the
Act. Forward-looking statements are based on currently available information,
expectations, estimates, assumptions and projections, and management's judgment
about the Company, the water utility industry and general economic conditions.
Such words as expects, intends, plans, believes, estimates, assumes,
anticipates, projects, predicts, forecasts or variations of such words or
similar expressions are intended to identify forward-looking statements. The
forward-looking statements are not guarantees of future performance. They are
subject to uncertainty and changes in circumstances. Actual results may vary
materially from what is contained in a forward-looking statement. Factors that
may cause a result different than expected or anticipated include: governmental
and regulatory commissions' decisions, including decisions on proper disposition
of property; changes in regulatory commissions' policies and procedures; the
timeliness of regulatory commissions' actions concerning rate relief; new
legislation ;the ability to satisfy requirements relating to the Sarbanes-Oxley
Act on and other regulation on internal control; electric power interruptions;
increases in suppliers' prices and the availability of supplies including water
and power; fluctuations in interest rates; changes in environmental compliance
and water quality requirements; acquisitions and our ability to successfully
integrate acquired companies; the ability to successfully implement business
plans; changes in customer water use patterns; the impact of weather on water
sales and operating results; access to sufficient capital on satisfactory terms;
civil disturbances or terrorist threats or acts, or apprehension about the
possible future occurrences of acts of this type; the involvement of the United
States in war or other hostilities; restrictive covenants in or changes to the
credit ratings on our current or future debt that could increase our financing
costs or affect our ability to borrow, make payments on debt or pay dividends;
and, other risks and unforeseen events. When considering forward-looking
statements, you should keep in mind the cautionary statements included in this
paragraph. The Company assumes no obligation to provide public updates of
forward-looking statements.
Additional information is available at our Web site at
www.calwatergroup.com.
Attachments (3).
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CALIFORNIA WATER SERVICE GROUP
CONDENSED CONSOLIDATED BALANCE SHEET
Unaudited
(In thousands, except per share data)
December 31, December 31,
2004 2003
---- ----
ASSETS
Utility plant:
Utility plant $ 1,144,074 $ 1,078,975
Less accumulated depreciation and
amortization 343,769 319,477
----------- -----------
Net utility plant 800,305 759,498
----------- -----------
Current assets:
Cash and cash equivalents 18,820 2,856
Customer receivables 15,867 18,434
Other receivables 10,445 5,125
Unbilled revenue 9,307 8,522
Materials and supplies 3,161 2,957
Taxes and other prepaid expenses 12,793 5,609
----------- -----------
Total current assets 70,393 43,503
----------- -----------
Regulatory assets 53,477 53,326
Other assets 18,678 16,708
----------- -----------
$ 942,853 $ 873,035
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CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock, $.01 par value $ 184 $ 169
Additional paid-in capital 131,271 93,748
Retained earnings 156,851 150,908
Accumulated other comprehensive loss (701) (301)
----------- -----------
Total common stockholders' equity 287,605 244,524
Preferred stock 3,475 3,475
Long-term debt, less current maturities 274,821 272,226
----------- -----------
Total capitalization 565,901 520,225
----------- -----------
Current liabilities:
Current maturities of long-term debt 1,100 904
Short-term borrowings -- 6,454
Accounts payable 19,745 23,776
Accrued expenses and other liabilities 36,367 32,430
----------- -----------
Total current liabilities 57,212 63,564
Unamortized investment tax credits 2,721 2,925
Deferred income taxes 54,826 38,005
Regulatory liabilities 18,811 16,676
Advances for construction 131,292 121,952
Contributions in aid of construction 94,915 90,529
Other long-term liabilities 17,175 19,159
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$ 942,853 $ 873,035
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CALIFORNIA WATER SERVICE GROUP
CONDENSED CONSOLIDATED STATEMENT OF INCOME
Unaudited
(In thousands, except per share data)
For the three months ended: December 31, December 31,
2004 2003
---- ----
Operating revenue $ 69,378 $ 69,626
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Operating expenses:
Operations 46,746 45,618
Maintenance 3,375 3,229
Depreciation and amortization 6,557 5,828
Income taxes 2,232 4,550
Property and other taxes 2,957 2,860
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Total operating expenses 61,867 62,085
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Net operating income 7,511 7,541
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Other income and expenses:
Non-regulated income, net 602 305
Gain on sale of non-utility property 1 3,068
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Total other income and expenses 603 3,373
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Interest expense:
Interest expense 4,651 4,686
Less capitalized interest 274 785
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Total interest expense 4,377 3,901
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Net income $ 3,737 $ 7,013
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Earnings per share
Basic $ 0.20 $ 0.41
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Diluted $ 0.20 $ 0.41
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Weighted average shares outstanding
Basic 18,350 16,932
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Diluted 18,380 16,944
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Dividends per share of common stock $0.28250 $0.28125
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CALIFORNIA WATER SERVICE GROUP
CONDENSED CONSOLIDATED STATEMENT OF INCOME
Unaudited
(In thousands, except per share data)
For the twelve months ended: December 31, December 31,
2004 2003
---- ----
Operating revenue $315,567 $277,128
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Operating expenses:
Operations 206,150 187,469
Maintenance 13,228 12,717
Depreciation and amortization 26,114 23,256
Income taxes 17,084 12,898
Property and other taxes 11,508 10,554
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Total operating expenses 274,084 246,894
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Net operating income 41,483 30,234
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Other income and expenses:
Non-regulated income, net 2,375 2,097
Gain on sale of non-utility property 8 4,603
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Total other income and expenses 2,383 6,700
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Interest expense:
Interest expense 18,664 19,512
Less capitalized interest 824 1,995
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Total interest expense 17,840 17,517
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Net income $ 26,026 $ 19,417
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Earnings per share
Basic $ 1.46 $ 1.21
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Diluted $ 1.46 $ 1.21
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Weighted average shares outstanding
Basic 17,652 15,882
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Diluted 17,674 15,893
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Dividends per share of common stock $1.13000 $1.12500
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